Beijing: A Chinese business survey provided fresh tentative evidence that the manufacturing sector in the world’s third largest economy may be nearing a bottom, though it continues to contract and shed jobs.
The Purchasing Managers’ Index (PMI) produced for brokerage CLSA rose to a seasonally adjusted 45.1 in February, the third straight month of improvement since it plumbed to a record low of 40.9 in November.
Still, it was the seventh month in a row in which the index was below the no-change line of 50 that marks the difference between expansion and contraction, and the fourth lowest reading since the survey started in 2004.
Output, new orders and employment continued to contract in February, just at a less marked pace than a month before.
The output sub-index stood at 43.9 in February, up from 39.7 in January, but still well below the boom-bust line of 50.
“The rise in the PMI and its orders indices is encouraging, but as in January, caution is required in interpretation. Manufacturing activity is still contracting, only at a more moderate pace than at the end of 2008,” Eric Fishwick, head of economic research at CLSA, said in a statement.
Fishwick said the surge in new loans in January, to a monthly record of 1.6 trillion yuan (Rs12.18 trillion today), had so far had only a modest impact in boosting domestic orders for manufactured goods. “Most of the improvement in the PMI new orders index reflects export orders,” he added.
In a development likely to concern authorities, manufacturers continued to shed jobs in February, although at a slower rate than the record pace set in January. The employment sub-index edged up to 46.6, from 45 the month before.
Beijing, worried that a rebound in unemployment could feed into protests or violence, has set an official target of 8% growth this year, after growth fell to 9% last year from 13% in 2007.
Many economists have said that target could be difficult to meet, even with the government’s 4 trillion yuan stimulus package, and Prime Minister Wen Jiabao acknowledged over the weekend that the global financial crisis could still take a turn for the worse.
Analysts cautioned against reading too much into the rise in PMI, which is derived from a survey of at least 400 manufacturers conducted for CLSA by Markit Economics.
The government’s official PMI for February is due to be released on Wednesday.
Zhou Xin contributed to this story.